When I have thought (I admit it wasn’t often by any means) about insider trading, I figured it was illegal for all Americans, especially so for people who routinely debate and pass laws. I was wrong. Imagine you are sitting on a finance committee. The Secretary of Treasury and the Federal Reserve chairman request a special emergency meeting. At these meetings the information is so explosive and the need for discretion is so high that all electronic devices are confiscated. You learn that the world economy could tank in the next few days. You are now in possession of information that most of the rest of the country doesn’t have a clue about and it is perfectly legal to trade stock in the companies that will be effected by this information.

In 2004 Brian Baird, former state representative from Washington, first introduced the STOCK Act, or Stop Trading On Congressional Knowledge Act. This bill makes it illegal for Congress, their employees, and the Executive Branch to use inside information it gains from doing the nation’s business for profit, and requires monthly reporting on major financial transactions. It has been reintroduced each year with no support until 60 Minutes dedicated a segment to congressional insider trading that aired on November 13, 2011. Brian Baird:

“There should only be one thing in your mind when you’re drafting legislation, ‘Is this good for the United States of America?’ That’s it. If you’re starting to say to yourself ‘how’s this going to affect my investments,’ you’ve got– you’ve got a mixed agenda and a mixed purpose for being there.

One line in a bill in Congress can be worth millions and millions of dollars. There was one night, we had a late, late night caucus and you could kind of tell how a vote was going to go the next day. I literally walked home and I thought, ‘Man, if you– if you went online and made– some significant trades, you could make a lot of money on this.’ You– you could just see it. You could see the potential here.”

Here is the segment in it’s entirety:

As the years passed things have gotten even worse (Really? In a corrupting place like D.C.? Never!). Washington is full of information and certain people are more than happy to buy and sell that information, this is known as political intelligence. From the Wall Street Journal:

“Keen for information about what’s happening behind the scenes, hedge funds have been drilling ever deeper into the government. Thousands of political insiders are being paid by hedge funds, private-equity firms and other big investors. Former Federal Reserve Chairman Alan Greenspan, for example, is an adviser to Paulson & Co., and former Treasury Secretary John Snow works for Cerberus Capital Management. SAC Capital Advisors and Eton Park Capital Management have hired former congressional staffers.

Some investment groups contract with lobbyists to pass along information they pick up during conversations with lawmakers, congressional aides and other government officials. “I have information from doing my day job as a lobbyist,” explains one lobbyist. “That information has value on Wall Street. So I sell it.”

Two versions of this bill have been passed by Congress this week. In the Senate version, Senator Chuck Grassley (R-IA) added an amendment which was adopted in the Senate on a bipartisan basis (remember bipartisanship?), that would require “registration for lobbyists who seek information from Congress in order to trade on that information.” In the House version, House Majority Leader Eric Cantor (R-VA) stripped the amendment, watering down the bill significantly. Now, these two versions will head to a Senate conference committee to work out the differences between them.

“CREW has pointed out Rep. Cantor’s strong ties to Wall Street investors before. In addition, it turns out the chairman of one of the leading political intelligence firms has donated thousands to Rep. Cantor. Mark Gerson, chairman of Gerson Lehrman Group Inc., donated $23,500 to Rep. Cantor’s joint fundraising committee during the 2010 election cycle alone, according to campaign contribution data tracked by CQ Moneyline. So far during the 2011 cycle, Mr. Gerson has contributed $15,000 to the Cantor Victory Fund. Mr. Gerson’s donations made Rep. Cantor, by far, the biggest recipient of donations from employees of Gerson Lehrman.

Given the secrecy in which the political intelligence firms are cloaked, Rep. Cantor may well have received significant contributions from others in the industry. We just don’t know. And that’s the point.”

This is not a democrat or a republican issue; this is a greed issue, both parties are involved in these unethical insider trading deals. We are in a situation where all politicians claim a calling to public duty, but in reality some are running to enhance their bank accounts. Presently, there are 249 millionaires in Congress giving a 47% rate completely at odds with the 1% that occurs in the rest of society.